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Morgan Stanley faces $6.1m fine in bond fees case

Securities regulators plan to penalise Morgan Stanley $6.1m (â‚¬4.4m) for allegedly overcharging customers on $59m in bond sales, in a case that shows how easily unwary investors can overpay for such securities.

The Wall Street firm allegedly overcharged customers of its retail brokerage unit in more than 2,800 separate bond sales from the firm's own inventory. The Financial Industry Regulatory Authority, the combined broker-regulation and enforcement organisation for Wall Street, plans to fine the blue-chip securities firm $1.5m and order $4.6m in restitution to customers who paid markups as high as 18% in 2001 for surplus notes issued by Kemper Lumbermens Mutual Casualty. The declaration is expected on Thursday.

Although securities regulations generally limit the amount of profit or markup a brokerage firm can receive on securities sales at 5%, Morgan Stanley sold the bonds in the first half of 2001 at prices 4% to 18% higher than the firm itself had paid.